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Brazil PMI May 2017

Brazil: Manufacturing PMI climbs to best result since February 2013

May 2, 2017

Conditions in Brazil’s manufacturing sector improved notably in May as the Markit manufacturing Purchasing Managers’ Index (PMI) rose further above the crucial 50-threshold that separates expansion from contraction in business conditions in the manufacturing sector. The index rose from 50.1 in April to 52.0 in May, the best result since February 2013. The upturn provides further evidence that green shoots are finally emerging in the battered economy.

According to IHS Markit, the improvement reflected strong increases in output and new orders, which both rose to multi-year highs. In addition, a surge in new projects caused firms to purchase more inputs. However, the broad gains seen in the past two months have yet to translate over into the labor market and employment fell in May. Price pressures remained pronounced, likely due to costlier raw materials and a weak real.

Retail sales (excluding cars and construction) fell 1.5% from the previous month in seasonally-adjusted terms in December, which contrasted November’s revised 1.0% increase (previously reported: +0.7% month-on-month).
Declines were seen nearly across the board, with only two of the eight components of the index seen growth in sales.

At its 7 February meeting, the Central Bank of Brazil’s Monetary Policy Committee (Comité de Politica Monetaria, COPOM) decided to cut the benchmark SELIC interest rate by 25 basis points, a smaller cut than the 50 basis-point reduction it made at the previous meeting.